CyberGuard Locks Onto SCUR

CyberGuard Corp. (Nasdaq: CGFW) has made an unsolicited offer to buy security company Secure Computing Corp. (Nasdaq: SCUR) in an attempt to boost its product portfolio and increase its customer accounts.

In a letter sent to Secure Computing over the weekend, CyberGuard proposed a one-for-one stock exchange transaction, a deal that equates to about $300 million at Friday's closing price of CyberGuard shares. The move comes just days after Secure Computing made a negative second-quarter earnings forecast, which executives blamed on poor performance in the Federal Government sector.

Although full financial details are yet to be revealed, CyberGuard CEO Pat Clawson told Next-Gen Data Center Forum this morning that his company had been following Secure Computing for the last two years. He also estimates that a merger could provide $14 million in annual cost savings.

On Monday, the market reacted along lines typical of acquisition offers -- driving the shares of the potential acquiree, Secure Computing, up more than 10 percent, or $0.64, to $7.02. Shares in potential acquirer CyberGuard fell nearly 5 percent, or $0.36, to $7.44.

Does such a deal make sense? Jon Oltsik, senior analyst for information security at The Enterprise Strategy Group Inc. believes that it will.There’s a greater good here if they can pull it off. CyberGuard has been working on the component side of security appliances,” he says, while "Secure Computing has done some strong work on authentication.

"Secure Computing has [authentication] partnerships with Check Point, Nortel, and Cisco," he notes. "This is an area that CyberGuard has not gone after yet."

But, just as importantly, an acquisition could give CyberGuard some added momentum in its target markets -- the largest 1,000 global companies and government customers. Despite Secure Computing’s poor earnings forecast, the company reports a customer base of 11,000 corporate and government bodies.

With CyberGuard coming up against established vendors such as Juniper Networks Inc. (Nasdaq: JNPR) and Cisco, access to additional customers will prove critical.

If the deal comes off, Secure Computing would join a string of CyberGuard acquisitions. In January last year, CyberGuard purchased certain assets of NetOctave, a manufacturer of security processors and VPN acceleration products (see CyberGuard Buys Piece of NetOctave). Then, last November, CyberGuard acquired SnapGear, a developer of embedded Linux security and edge firewall/VPN security appliances.More recently, the company bought German content security specialist Webwasher AG for $40 million in cash and CyberGuard shares and up to an additional $10 million for all of the shares of Webwasher (see CyberGuard Acquires Webwasher).

A spokesman for Secure Computing said that the offer was "a complete surprise" and added that the company will respond "in due course."

— James Rogers, Site Editor, Next-gen Data Center Forum